UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10 - K

|X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES  EXCHANGE
      ACT OF 1934 for the fiscal year ended June 30, 2009
                                            -------------

                                       OR

[_]   TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15 (d) OF THE  SECURITIES
      EXCHANGE ACT OF 1934 for the transition period from           to
                                                          ---------    ---------

                          Commission file number 1-4383
                                                 ------

                         ESPEY MFG. & ELECTRONICS CORP.
                         ------------------------------
             (Exact name of registrant as specified in its charter)

          NEW YORK                                       14-1387171
          --------                                       ----------
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation  or  organization)

                233 Ballston Avenue, Saratoga Springs, NY 12866
                -----------------------------------------------
           (Address of principal executive offices including Zip Code)

        (Registrant's telephone number including area code) (518)245-4400
                                                            -------------

           Securities registered pursuant to Section 12(b) of the Act:

      Title of each class           Name of each  exchange  on which  registered
      -------------------           --------------------------------------------
Common  Stock $.33-1/3 par value    NYSE - Amex
Common Stock Purchase Rights        NYSE - Amex

        Securities registered pursuant to Section 12 (g) of the Act: None

      Indicate by check mark if the registrant is a well-known  seasoned issuer,
as defined in Rule 405 of the Securities Act.
                                                                  [ ] Yes |X| No
      Indicate by check mark if the  registrant  is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.
                                                                  [ ] Yes |X| No
      Indicate by check mark  whether the  registrant  (1) has filed all reports
required to the filed by Section 13 or 15 (d) of the Securities  Exchange Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.
                                                                  |X| Yes [ ] No
      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
      Indicate  by check mark  whether  the  registrant  is a large  accelerated
filer, an accelerated  filer, a  non-accelerated  filer, or a smaller  reporting
company:
      [ ] Large  accelerated  filer [ ]  Accelerated  filer [ ]  Non-accelerated
filer  |X|  Smaller  reporting  company
      Indicate by check mark whether the registrant is a shell company.  [ ] Yes
|X| No
      The aggregate market value of the voting stock held by  non-affiliates  of
the  registrant was  $26,659,835  based upon the closing sale price of $18.16 on
the NYSE - Amex on December 31, 2008.
      At September  8, 2009,  there were  2,314,803  shares  outstanding  of the
registrant's Common stock, $.33-1/3 par value.

                       DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the registrant's  definitive  proxy statement  relating to the
2009  Annual  Meeting  of  Shareholders,  to be filed  with the  Securities  and
Exchange Commission, are incorporated by reference in Part III, Items 10 through
14 on Form 10-K as indicated herein.

                                       1
<PAGE>

Forward-Looking Statements

This Annual Report on Form 10-K  contains  forward-looking  statements  that are
based on management's  expectations,  estimates,  projections  and  assumptions.
Words  such  as  "expects,"  "anticipates,"  "plans,"  "believes,"  "scheduled,"
"estimates"  and variations of these words and similar  expressions are intended
to identify  forward-looking  statements.  Forward-looking  statements  are made
pursuant to the safe harbor  provisions  of the  Private  Securities  Litigation
Reform Act of 1995, as amended.  These  statements  are not guarantees of future
performance  and involve certain risks and  uncertainties  that are difficult to
predict.  Therefore, actual future results and trends may differ materially from
what is  forecast  in  forward-looking  statements  due to a variety of factors,
including, without limitation:

      o     Changing  priorities  in  the  U.S.   government's   defense  budget
            (including changes in priorities in response to terrorist threats or
            to improve homeland security);
      o     Termination  of government  contracts  due to unilateral  government
            action;
      o     Differences in anticipated and actual program performance, including
            the ability to perform under long-term  fixed-price contracts within
            estimated  costs,  and  performance  issues with key  suppliers  and
            subcontractors;
      o     Potential of changing prices for energy and raw materials.

All  forward-looking  statements speak only as of the date of this report or, in
the case of any document  incorporated by reference,  the date of that document.
All subsequent written and oral forward-looking  statements  attributable to the
Company or any  person  acting on the  Company's  behalf  are  qualified  by the
cautionary  statements  in this  section.  The Company  does not  undertake  any
obligation  to update or  publicly  release  any  revisions  to  forward-looking
statements to reflect events, circumstances or changes in expectations after the
date of this report.


                                       2
<PAGE>

                                     PART I
Item 1.  Business

General

Espey Mfg. & Electronics Corp. (the "Company") located in Saratoga Springs,  New
York, is engaged principally in the development,  design, production and sale of
specialized  electronic power supplies, a wide variety of transformers and other
types of iron-core components,  and electronic system components. In some cases,
the  Company   manufactures  such  products  in  accordance  with  pre-developed
mechanical and electrical  requirements  ("build to print"). In other cases, the
Company  is  responsible  for both the  overall  design and  manufacture  of the
product. The Company does not generally manufacture  standardized components and
does not have a product line.  The Company  operates a one-segment  business and
was incorporated in 1928.

The electronic  power supplies and components  manufactured  by the Company find
application principally in (i) shipboard and land based radar, (ii) locomotives,
(iii)  aircraft,   (iv)  short  and  medium  range  communication  systems,  (v)
navigation systems and (vi) land based military artillery.

The Company's iron-core  components include (i) transformers of the audio, power
and  pulse  types,  (ii)  magnetic  amplifiers  and  (iii)  audio  filters.  The
electronic system components manufactured by the Company include antenna systems
and high power radar transmitters. These system components utilize the Company's
own electronic power supplies,  transformers and other iron-core  components and
mechanical assemblies.

In the fiscal years ended June 30, 2009 and 2008, the Company's total sales were
$27,241,635 and $25,701,739,  respectively. Sales to two customers accounted for
33% and 30% of total sales in 2009. Sales to two customers accounted for 31% and
25% of total sales in 2008.

Export  sales in 2009 and 2008 were  approximately  $4,691,000  and  $5,538,000,
respectively.

Sources of Raw Materials

The Company has never experienced any significant delay or shortage with respect
to the purchase of raw materials and components  used in the  manufacture of its
products, and has at least two potential sources of supply for a majority of its
raw materials.  However,  certain  components used in our products are available
from only a limited number of sources,  and other  components are only available
from a single source.  Despite the risk associated with limited or single source
suppliers, the benefits of higher quality goods and timely delivery minimize and
often limit any  potential  risk and can  eliminate  problems with part failures
during production.

Sales Backlog

At September 8, 2009, the Company's backlog was approximately $38.3 million. The
total  backlog at June 30,  2009 was  approximately  $39.1  million  compared to
approximately  $44.8  million at June 30,  2008.  The  Company's  total  backlog
represents  the estimated  remaining  sales value of work to be performed  under
firm  contracts.  The Company's  backlog and risks  associated  with  government
contracts is discussed in greater detail in Management's Discussion and Analysis
of Financial Condition and Results of Operations, contained in Item 7 below.

It is presently anticipated that a minimum of $29.6 million of orders comprising
the June 30, 2009 backlog will be filled  during the fiscal year ending June 30,
2010. The minimum of $29.6 million does not include any shipments,  which may be
made against orders subsequently received during the fiscal year ending June 30,
2010.  The estimate of the June 30, 2009 backlog to be shipped in fiscal 2010 is
subject to future  events,  which may cause the amount of the  backlog  actually
shipped to differ from such estimate.

Marketing and Competition

The  Company  markets  its  products  primarily  through  its own  direct  sales
organization.  Business is solicited  from large  industrial  manufacturers  and
defense companies,  the government of the United States, foreign governments and
major foreign electronic equipment  companies.  In certain countries the Company
has  external  sales  representatives  to help  solicit and  coordinate  foreign
contracts.  The Company is also on the eligible list of  contractors of agencies
of the United  States  Department  of Defense  and  generally  is  automatically
solicited  by such  agencies  for  procurement  needs  falling  within the major
classes of products produced by the Company.  In addition,  the Company directly
solicits bids from the United States Department of Defense for prime contracts.

                                       3
<PAGE>

There is competition in all classes of products manufactured by the Company from
divisions of the largest electronic companies,  as well as many small companies.
The  Company's  sales do not  represent a  significant  share of the  industry's
market for any class of its products.  The principal  methods of competition for
electronic  products of both a military and  industrial  nature  include,  among
other  factors,  price,  product  performance,  the experience of the particular
company and history of its dealings in such  products.  The Company,  as well as
other companies  engaged in supplying  equipment for military use, is subject to
various risks, including,  without limitation,  dependence on the United States.
and foreign government  appropriations and program allocations,  the competition
for  available  military  business,  and  government  termination  of orders for
convenience.

The  Company's  business is not  considered  to be  seasonal.  Also,  management
believes that due to the nature of the  Company's  business the Company will not
be adversely affected by recessionary factors in the U.S. economy generally.

Research and Development

The  Company's  expenditures  for research and  development  were  approximately
$40,678 and $53,586 in fiscal 2009 and 2008, respectively. Some of the Company's
engineers and technicians spend varying degrees of time on either development of
new products or improvements of existing products.

Employees

The Company had 168 employees as of September 8, 2009.  Some of these  employees
are  represented by the  International  Brotherhood of Electrical  Workers Local
#1799.  A new  collective  bargaining  agreement was approved in June 2008.  The
four-year  agreement  expires  on June  30,  2012.  The  contract  includes  pay
increases  of 4%,  3.75%,  3.75%  and 4% for  each  year,  respectively,  of the
four-year  contract.  Relations  with  the  Union  are  considered  good.  Union
membership at September 8, 2009 was 70 people.

Government Regulations

Compliance  with federal,  state and local  provisions that have been enacted or
adopted  to  regulate  the  discharge  of  materials  into the  environment,  or
otherwise relating to the protection of the environment,  did not in fiscal year
2009,  and the Company  believes  will not in fiscal year 2010,  have a material
effect upon the capital expenditures, net income, or competitive position of the
Company.

The Company's  U.S.  government  contract and  subcontract  orders are funded by
government  budgets,  which operate on an  October-to-September  fiscal year. In
February of each year, the President of the United States presents to Congress a
proposed budget for the upcoming  fiscal year. This budget includes  recommended
appropriations  for every  federal  agency and is the result of months of policy
and program  reviews  throughout  the executive  branch.  From February  through
September of each year,  the  appropriations  and  authorization  committees  of
Congress  review the  President's  budget  proposals  and  establish the funding
levels  for  the  upcoming  fiscal  year  in  appropriations  and  authorization
legislation. Once these levels are enacted into law, the Executive Office of the
President administers the funds to the agencies.

There are two primary risks associated with this process. First, the process may
be delayed or disrupted  because of congressional  schedules,  negotiations over
funding levels for programs or unforeseen  world events,  which could,  in turn,
alter the  funding for a program or  contract.  Second,  funding for  multi-year
contracts can be changed by future appropriations, which could affect the timing
of funds, schedules and program content.

Also,  our  international  sales  are  denominated  in United  States  currency.
Consequently, changes in exchange rates that strengthen the United States dollar
could increase the price in local  currencies of our products in foreign markets
and make our products relatively more expensive than competitors' products.

U.S. Government Defense Contracts and Subcontracts

Generally,  U.S.  government  contracts  are  subject  to  procurement  laws and
regulations.  Some  of the  Company's  contracts  are  governed  by the  Federal
Acquisition Regulation (FAR), which lays out uniform policies and procedures for
acquiring  goods  and  services  by the  U.S.  government,  and  agency-specific
acquisition  regulations that implement or supplement the FAR. For example,  the
Department of Defense implements the FAR through the Defense Federal Acquisition
Regulation (DFAR).

                                       4
<PAGE>

The FAR also contains  guidelines and  regulations for managing a contract after
award, including conditions under which contracts may be terminated, in whole or
in part,  at the  government's  convenience  or for  default.  If a contract  is
terminated for the  convenience of the  government,  a contractor is entitled to
receive  payments for its  allowable  costs and, in general,  the  proportionate
share of fees or earnings  for the work done.  If a contract is  terminated  for
default, the government generally pays for only the work it has accepted.  These
regulations  also subject the company to financial  audits and other  reviews by
the  government  of its costs,  performance,  accounting  and  general  business
practices  relating  to its  contracts,  which may result in  adjustment  of the
company's contract-related costs and fees.

Item 2.  Property

The  Company's  entire  operation,   including   manufacturing  and  engineering
facilities, is located in Saratoga Springs, New York.

The  Saratoga  Springs  plant,  which the  Company  owns,  consists  of  various
adjoining  one-story  buildings on a 22 acre site,  approximately eight acres of
which is unimproved. The property is not subject to mortgage indebtedness or any
other  material  encumbrance.  The plant has a sprinkler  system  throughout and
contains  approximately  151,000 square feet of floor space,  of which 90,000 is
used  for  manufacturing,  24,000  for  engineering,  33,000  for  shipping  and
climatically secured storage,  and 4,000 for offices.  The offices,  engineering
and some manufacturing  areas are  air-conditioned.  In addition to assembly and
wiring  operations,  the plant  includes  facilities  for  varnishing,  potting,
plating, impregnation and spray-painting operations. The manufacturing operation
also includes a complete machine shop, with welding and sheet metal  fabrication
facilities  adequate for substantially all of the Company's current  operations.
Besides normal test equipment,  the Company  maintains a  sophisticated  on-site
environmental  test  facility.  In  addition  to  meeting  all of the  Company's
in-house  needs,  the plating,  machine shop and  environmental  facilities  are
available to other companies on a contract basis.

Item 3.  Legal Proceedings

         None

Item 4.  Submission of Matters to a Vote of Security Holders

         None


                                       5
<PAGE>

                                     PART II

Item 5.  Market  for the  Registrant's  Common  Equity and  Related  Stockholder
         Matters and Issuer Purchases of Equity Securities

Price Range of Common Stock

The table below shows the range of high and low prices for the Company's  common
stock on the NYSE - Amex (ticker symbol "ESP"), the principal market for trading
in the common  stock,  for each  quarterly  period for the last two fiscal years
ended June 30:

         2009                                       High         Low
         First Quarter                              22.00        18.10
         Second Quarter                             21.10        16.91
         Third Quarter                              19.85        13.05
         Fourth Quarter                             17.00        14.30

         2008                                       High         Low
         First Quarter                              24.08        19.71
         Second Quarter                             24.00        17.60
         Third Quarter                              23.75        14.75
         Fourth Quarter                             23.20        17.40

Holders

The  approximate  number of  holders  of record of the  common  stock was 109 on
September 8, 2009 according to records of the Company's transfer agent. Included
in this number are shares held in "nominee" or "street" name and, therefore, the
number of beneficial  owners of the common stock is believed to be substantially
in excess of the foregoing number.

Dividends

The Company paid cash dividends on common stock of $2.40 and $2.25 per share for
the fiscal years ended June 30, 2009 and 2008,  respectively,  which  included a
special  dividend of $1.50 per share during each of such fiscal years. The Board
of Directors has authorized the payment of a fiscal 2010 first quarter  dividend
of $.225 payable  September  25, 2009 to shareholders of record on  September 4,
2009.

During  fiscal  2009,  the Company sold common  stock to certain  employees  and
directors as they exercised  existing stock options  granted under a shareholder
approved  plan.  During the year,  8,800  shares were sold at prices that ranged
from  $11.25 a share to  $17.80 a share.  The  securities  were  sold for  cash.
Proceeds are used for general working capital purposes.

The Company did not make any open market  purchases of equity  securities in the
fiscal 2009 fourth quarter.

The following  table sets forth  information as of June 30, 2009 with respect to
compensation plans under which equity securities of the Company may be issued.

                                     Equity Compensation Plan Information

<TABLE>
<CAPTION>
                           Number of securities to      Weighted-average             Number of Securities remaining
                           be issued upon exercise      exercise price of         available for future issuance under
                           of outstanding options,    outstanding options,        equity compensation plan (excluding
Plan Category                warrants and rights       warrants and rights         securities reflected in column (a))
----------------------------------------------------------------------------------------------------------------------
                                     (a)                       (b)                                (c)
----------------------------------------------------------------------------------------------------------------------
<S>                                <C>                       <C>                                <C>
Equity compensation
   plans approved by
   security holders                140,400                   $17.43                             338,500
Equity compensation
   plans not approved
   by security holders
                                 ---------                                                    ---------
           Total                   140,400                                                      338,500
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       6
<PAGE>

Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

Business Outlook

The business outlook for the Company is excellent.  The order backlog,  together
with potential new orders realized from  outstanding  quotations by the Company,
remain at a high level.  Expectations  are for product mix and margins to remain
favorable for fiscal year 2010, and management  expects  revenues to increase in
fiscal year 2010 over fiscal year 2009.  During fiscal 2009 new orders  received
by  the  Company  were  approximately  $21.6  million.   The  order  backlog  of
approximately  $39.1  million at June 30, 2009 gives the Company a solid base of
future  sales.  It is presently  anticipated  that a minimum of $29.6 million of
orders  comprising  the June 30, 2009 backlog  will be filled  during the fiscal
year ending June 30,  2010.  The minimum of $29.6  million  does not include any
shipments,  which may be made against orders  subsequently  received  during the
fiscal year ending June 30, 2010. The backlog represents the estimated remaining
sales value of work to be performed under firm contracts.

In addition to the backlog,  the Company  currently has  outstanding  quotations
representing in excess of $66.6 million in the aggregate for both repeat and new
programs.  Many potential  orders are currently  being  discussed and negotiated
with existing and potential new customers.  The outstanding quotations encompass
various  new and  previously  manufactured  power  supplies,  transformers,  and
subassemblies.  However, there can be no assurance that the Company will acquire
any or all of the anticipated  orders described above, many of which are subject
to allocations of the United States defense  spending and factors  affecting the
defense industry and military procurement generally.

Two  significant  customers  in fiscal  2009 and 2008  represented  63% and 56%,
respectively,  of the Company's total sales.  These sales represent  significant
programs which the Company is a significant supplier of parts. While the Company
has always had a small number of  customers  that make up its total sales in any
given year, management is pursuing  opportunities with current and new customers
with an  objective of lowering the overall  concentration  of sales,  mitigating
excessive  reliance  upon a single  major  product of a  particular  program and
minimizing the impact of loss of a single  significant  customer.  We anticipate
significant new orders against the three programs discussed below in the Results
of Operations, which, if realized, will diversify our customer base.

Management  continues to invest in capital  equipment to upgrade its  technology
and stay  current with the  industry.  Capital  expenditures  are expected to be
approximately  $350,000  for  fiscal  2010.  Also,  management  along  with  the
Company's Board of Directors  continues to look for potential  opportunities  to
expand the Company's business through acquisitions.

Results of Operations

Net Sales for fiscal years ended June 30, 2009 and 2008,  were  $27,241,635  and
$25,701,739, respectively, a 6% increase. This increase can be attributed to the
contract specific nature of the Company's  business and the timing of deliveries
on these contracts. More specifically,  shipments of power supplies, spares, and
antennas  increased  by  approximately  $2.3  million  offset by a  decrease  of
approximately $.9 million in transformer shipments.

For the fiscal years ended June 30, 2009 and 2008 gross profits were  $6,086,726
and  $6,862,246,  respectively.  Gross profit as a percentage of sales was 22.3%
and  26.7%,  for  fiscal  2009 and 2008,  respectively.  The  primary  factor in
determining  gross profit and net income is product  mix.  The gross  profits on
mature  products and build to print contracts are higher as compared to products
that are still in the  engineering  development  stage or in the early stages of
production.  In any given accounting period the mix of product shipments between
higher margin mature programs and less mature programs including loss contracts,
has a  significant  impact on gross  profit and net income.  The  reduced  gross
profit and gross profit percentage in fiscal 2009 as compared to fiscal 2008 was
primarily  the result of  unexpected  losses  incurred  on three  programs  with
significant  engineering and production time required for design efforts.  These
three programs  experienced  significant  cost overruns due to extended  product
qualification  testing and  difficulties  moving the products  from  engineering
design into full production.  Currently, one program has completed qualification
testing and has moved into full production.  The other two programs are still in
pre-qualification  stages and have made significant progress towards completion.
Management is not anticipating any significant  future losses on these programs.
Management  continues  to  evaluate  the  Company's  workforce  to  ensure  that
production   and  overall   execution  of  the  backlog  orders  and  additional
anticipated  orders are successfully  obtained and executed.  Employment of full
time  equivalents  at June 30,  2009 was 169  compared to 170 people at June 30,
2008.

Selling, general and administrative expenses were $2,826,676 for the fiscal year
ended June 30, 2009,  an increase of $203,363,  or 7.8% as compared to the prior
year. This increase  relates  primarily to an increase in wages and commissions,
travel expenses and consulting fees.

                                       7
<PAGE>

Other  income for the fiscal years ended June 30, 2009 and 2008 was $345,010 and
$712,252,  respectively,  a 51.6%  decrease.  This  decrease is due to a drop in
scrap  metal  income  and  interest  income  on  the  Company's  cash  and  cash
equivalents and short-term  investments.  The decrease in interest income is due
to lower interest rates  available as well as lower cash and cash equivalent and
short-term  investment  balances.  The Company  does not  believe  that there is
significant risk associated with its investment  policy,  since at June 30, 2009
all  of  the  investments  were  primarily   represented  by  short-term  liquid
investments including certificates of deposit and money market funds.

The effective income tax rate was 24.2% in fiscal 2009 and 30.9% in fiscal 2008.
The  effective  tax rate is less than the  statutory  tax rate mainly due to the
benefit the Company  receives on its  Qualified  Production  Activities  and the
benefit derived from the ESOP dividends paid on allocated shares.  The deduction
for ESOP dividends was substantially  larger in 2009 as compared to 2008, due to
the special  dividend of $1.50 per share that was paid to ESOP  participants  in
August 2009.

Net income for fiscal 2009, was  $2,733,240 or $1.30 and $1.29 per share,  basic
and diluted,  respectively,  compared to net income of  $3,421,869  or $1.65 and
$1.63 per share, basic and diluted,  respectively, for fiscal 2008. The decrease
in net income per share was  primarily due to loss  contracts in three  programs
described  above resulting in lower gross profits,  higher selling,  general and
administrative costs and the decrease in interest income.

Liquidity and Capital Resources

The Company's  working  capital is an appropriate  indicator of the liquidity of
its business,  and during the past two fiscal years, the Company, when possible,
has  funded  all of its  operations  with cash flows  resulting  from  operating
activities  and when  necessary  from its  existing  cash and  investments.  The
Company did not borrow any funds during the last three fiscal years.  Management
had available a $3,000,000 line of credit to help fund further growth or working
capital  needs,  but did not  anticipate  the need for any borrowed funds in the
foreseeable  future and therefore did not renew the line of credit which expired
November 30, 2007.

The Company's  working  capital as of June 30, 2009 and 2008 was $25,726,492 and
$27,448,722,  respectively.  During 2009 and 2008 the Company repurchased 19,899
and 36,091 shares, respectively, of its common stock from the Company's Employee
Retirement Plan and Trust ("ESOP") and in other open market transactions,  for a
total  purchase  price of $311,545 and  $769,443  respectively.  Under  existing
authorizations  from the  Company's  Board of  Directors,  as of June 30,  2009,
management is authorized to purchase an additional $1,688,454 million of Company
stock.

The table below  presents  the summary of cash flow  information  for the fiscal
year indicated:

                                                         2009          2008
                                                         ----          ----
Net cash provided by operating activities             $   384,936   $ 4,147,247
Net cash provided by (used in) investing activities       731,666    (3,598,961)
Net cash used in financing activities                  (5,193,036)   (4,792,644)

Net cash provided by operating  activities  fluctuates between periods primarily
as a result of  differences  in net  income,  the  timing of the  collection  of
accounts receivable,  purchase of inventory, receipt of progress payments, level
of sales and  payments  of accounts  payable.  Net cash  provided  by  investing
activities  increased  in fiscal 2009 due to the  increase in proceeds  from the
maturity of  short-term  investments.  The  increase  in cash used in  financing
activities  is due  primarily to an increase in dividends  paid on common stock.
Included in  dividends  paid are two special  dividends  of $1.50 per share that
were paid in December 2008 and March 2008.

The Company believes that the cash generated from operations and when necessary,
from  existing  cash  and  cash  equivalents,  will be  sufficient  to meet  its
long-term funding requirements for the foreseeable future.

Management  believes  that the  Company's  reserve  for bad  debts of  $3,000 is
adequate given the customers with whom the Company does business.  Historically,
bad debt expense has been minimal.

During  fiscal year 2009 and fiscal  2008,  the Company  expended  $280,790  and
$517,959,  respectively,  for plant improvements and new equipment.  The Company
has budgeted  approximately $350,000 for new equipment and plant improvements in
fiscal 2010.  Management  anticipates  that the funds required will be available
from current operations.

                                       8
<PAGE>

Critical Accounting Policies and Estimates

Our  significant  accounting  policies are  described in note 2 to the financial
statements.  We believe our most critical  accounting  policies  include revenue
recognition and cost estimation on our contracts.

Revenue Recognition and Estimates

A significant portion of our business is comprised of development and production
contracts. Generally revenues on long-term fixed-price contracts are recorded on
a  percentage  of  completion  basis using units of delivery as the  measurement
basis for progress toward completion.

Percentage  of  completion  accounting  requires  judgment  relative to expected
sales,  estimating costs and making assumptions  related to technical issues and
delivery  schedules.  Contract costs include material,  subcontract costs, labor
and an allocation of overhead  costs.  The estimation of cost at completion of a
contract is subject to numerous variables involving contract costs and estimates
as to the length of time to complete the contract. Given the significance of the
estimation  processes  and  judgments  described  above,  it  is  possible  that
materially  different  amounts of  expected  sales and  contract  costs could be
recorded if different  assumptions were used, based on changes in circumstances,
in the  estimation  process.  When a change in expected sales value or estimated
cost is determined, changes are reflected in current period earnings.




                                       9
<PAGE>

Item 8.  Financial Statements and Supplementary Data

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Espey Mfg. & Electronics Corp.
Saratoga Springs, New York

         We have  audited  the  accompanying  balance  sheet  of  Espey  Mfg.  &
Electronics  Corp. as of June 30, 2009 and 2008,  and the related  statements of
income,  stockholders'  equity,  and cash  flows  for  each of the  years in the
two-year period ended June 30, 2009. Espey Mfg. & Electronics Corp.'s management
is responsible for these financial statements.  Our responsibility is to express
an opinion on these financial statements based on our audits.

         We conducted our audits in accordance  with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain  reasonable  assurance about whether the
financial  statements  are free of  material  misstatement.  The  company is not
required  to have,  nor were we engaged  to  perform,  an audit of its  internal
control over financial reporting.  Our audit included  consideration of internal
control over financial  reporting as a basis for designing audit procedures that
are appropriate in the  circumstances,  but not for the purpose of expressing an
opinion on the  effectiveness  of the company's  internal control over financial
reporting.  Accordingly,  we express  no such  opinion.  An audit also  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial   statements,   assessing  the  accounting  principles  used  and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

         In our opinion,  the  financial  statements  referred to above  present
fairly,  in all  material  respects,  the  financial  position  of Espey  Mfg. &
Electronics  Corp.  as of  June  30,  2009  and  2008,  and the  results  of its
operations and its cash flows for each of the years in the two-year period ended
June 30, 2009 in conformity with accounting principles generally accepted in the
United States of America.


/s/Rotenberg & Co. LLP
----------------------
Rochester, New York
September 7, 2009


                                       10
<PAGE>
<TABLE>
<CAPTION>

Espey Mfg. & Electronics Corp.
Balance Sheet
June 30, 2009 and 2008
--------------------------------------------------------------------------------------------------------------
                                                                                          2009            2008
                                                                                          ----            ----
<S>                                                                               <C>             <C>
ASSETS
     Cash and cash equivalents ................................................   $  2,775,319    $  6,851,753
     Short term investments ...................................................      6,349,874       7,336,000
     Trade accounts receivable, net ...........................................      5,133,792       3,646,127
     Income tax receivable ....................................................             --         276,087
     ESOP receivable due to dividends on unallocated shares ...................         71,053          36,809
     Other receivables ........................................................            297           4,348

     Inventories:
              Raw materials ...................................................      1,394,441       1,575,116
              Work-in-process .................................................      1,107,880       1,151,332
              Costs related to contracts in process, net of progress
                payments of $60,079 in 2009 and $959,175 in 2008 ..............     10,526,884       7,461,786
                                                                                  ------------    ------------
                           Total inventories ..................................     13,029,205      10,188,234

     Deferred income taxes ....................................................        224,835         169,853
     Prepaid expenses and other current assets ................................        233,072         355,688
                                                                                  ------------    ------------
                           Total current assets ...............................     27,817,447      28,864,899
                                                                                  ------------    ------------
     Property, plant and equipment, net .......................................      2,738,222       2,956,590
     Loan receivable ..........................................................         38,673          65,003
                                                                                  ------------    ------------
                           Total assets .......................................   $ 30,594,342    $ 31,886,492
                                                                                  ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY

     Accounts payable .........................................................   $    999,521    $    600,931
     Accrued expenses:
              Salaries, wages and commissions .................................        219,533         184,377
              Vacation ........................................................        520,072         542,441
              Other ...........................................................         42,863          46,253
     Payroll and other taxes withheld and accrued .............................         42,075          42,175
     Income taxes payable .....................................................        266,891              --
                                                                                  ------------    ------------
                           Total current liabilities ..........................      2,090,955       1,416,177
                                                                                  ------------    ------------
     Deferred income taxes ....................................................         99,253         132,578
                                                                                  ------------    ------------
                           Total liabilities ..................................      2,190,208       1,548,755
                                                                                  ------------    ------------

     Common stock, par value $.33-1/3 per share
              Authorized 10,000,000 shares; Issued 3,029,874 shares in 2009 and
                2008. Outstanding 2,314,803 and 2,325,902 in 2009 and 2008,
                respectively (includes 201,666 and 225,000 Unearned
                ESOP Shares) ..................................................      1,009,958       1,009,958
     Capital in excess of par value ...........................................     13,755,808      13,476,609
     Retained earnings ........................................................     23,485,675      25,796,703
                                                                                  ------------    ------------
                                                                                    38,251,441      40,283,270

     Less:    Unearned ESOP shares ............................................     (2,914,077)     (3,251,248)
              Cost of  715,071 and 703,972 shares of common stock in
                treasury in 2009 and 2008, respectively .......................     (6,933,230)     (6,694,285)
                                                                                  ------------    ------------
                           Total stockholders' equity .........................     28,404,134      30,337,737
                                                                                  ------------    ------------

                           Total liabilities and stockholders' equity .........   $ 30,594,342    $ 31,886,492
                                                                                  ============    ============


The accompanying notes are an integral part of the financial statements.

                                                      11
</TABLE>
<PAGE>

Espey Mfg. & Electronics Corp.
Statements of Income
Years Ended June 30, 2009 and 2008
--------------------------------------------------------------------------------

                                                            2009            2008
                                                            ----            ----
Net sales .......................................  $  27,241,635   $  25,701,739
Cost of sales ...................................     21,154,909      18,839,493
                                                   -------------   -------------
         Gross profit ...........................      6,086,726       6,862,246

Selling, general and administrative expenses ....      2,826,676       2,623,313
                                                   -------------   -------------
         Operating income .......................      3,260,050       4,238,933

Other income (expense)
         Interest and dividend income ...........        327,260         640,412
         Other ..................................         17,750          71,840
                                                   -------------   -------------
                Total other income, net .........        345,010         712,252
                                                   -------------   -------------

Income before income taxes ......................      3,605,060       4,951,185

Provision for income taxes ......................        871,820       1,529,316
                                                   -------------   -------------

                           Net income ...........  $   2,733,240   $   3,421,869
                                                   =============   =============

Net income per share:
         Basic ..................................  $        1.30   $        1.65
         Diluted ................................  $        1.29   $        1.63
                                                   -------------   -------------

Weighted average number of shares outstanding:
         Basic ..................................      2,107,643       2,079,734
         Diluted ................................      2,113,798       2,103,836
                                                   =============   =============


The accompanying notes are an integral part of the financial statements.

                                       12
<PAGE>
<TABLE>
<CAPTION>

Espey Mfg. & Electronics Corp.
Statements of Changes in Stockholders' Equity
Years Ended June 30, 2009 and 2008
------------------------------------------------------------------------------------------------------------

                                        Outstanding                  Capital in    Unearned
                                           Common                    Excess of       ESOP         Retained
                                           Shares       Amount       Par Value      Shares        Earnings
                                        -----------   -----------   -----------   -----------    -----------
<S>                                     <C>         <C>           <C>           <C>            <C>
Balance as of June 30, 2007               2,316,893   $ 1,009,958   $12,890,269   $(3,600,459)   $27,054,325
                                        -----------   -----------   -----------   -----------    -----------

Net income, 2008                                                                                   3,421,869

Stock options exercised                      45,100                     200,744

Stock option expense                                                    143,530

Dividends paid on common stock
   $2.25 per share                                                                                (4,679,491)

Tax effect of stock options exercised                                    83,471

Purchase of treasury stock                  (36,091)

Reduction of unearned ESOP shares                                       158,595       349,211
                                        -----------   -----------   -----------   -----------    -----------

Balance as of June 30, 2008               2,325,902   $ 1,009,958   $13,476,609   $(3,251,248)   $25,796,703
                                        -----------   -----------   -----------   -----------    -----------

Net income, 2009                                                                                   2,733,240

Stock options exercised                       8,800                      59,932

Stock option expense                                                    109,921

Dividends paid on common stock
   $2.40 per share                                                                                (5,044,268)

Tax effect of stock options exercised                                    30,245

Purchase of treasury stock                  (19,899)

Reduction of unearned ESOP shares                                        79,101       337,171
                                        -----------   -----------   -----------   -----------    -----------

Balance as of June 30, 2009               2,314,803   $ 1,009,958   $13,755,808   $(2,914,077)   $23,485,675
                                        ===========   ===========   ===========   ===========    ===========


The accompanying notes are an integral part of the financial statements.

                                                                                                 (Continued)

</TABLE>

                                                   13
<PAGE>
<TABLE>
<CAPTION>

                                              Treasury Stock              Total
                                        ---------------------------    Stockholders'
                                           Shares         Amount          Equity
                                        ------------   ------------    ------------
<S>                                         <C>       <C>             <C>
Balance as of June 30, 2007                  712,981   $ (6,296,917)   $ 31,057,176
                                        ------------   ------------    ------------

Net income, 2008                                                          3,421,869

Stock options exercised                      (45,100)       372,075         572,819

Stock option expense                                                        143,530

Dividends paid on common stock                                           (4,679,491)
   $2.25 per share

Tax effect of stock options exercised                                        83,471

Purchase of treasury stock                    36,091       (769,443)       (769,443)

Reduction of unearned ESOP shares                                           507,806
                                        ------------   ------------    ------------

Balance as of June 30, 2008                  703,972   $ (6,694,285)   $ 30,337,737
                                        ============   ============    ============

Net income, 2009                                                          2,733,240

Stock options exercised                       (8,800)        72,600         132,532

Stock option expense                                                        109,921

Dividends paid on common stock
   $2.40 per share                                                       (5,044,268)

Tax effect of stock options exercised                                        30,245

Purchase of treasury stock                    19,899       (311,545)       (311,545)

Reduction of unearned ESOP shares                                           416,272
                                        ------------   ------------    ------------

Balance as of June 30, 2009                  715,071   $ (6,933,230)   $ 28,404,134
                                        ============   ============    ============
</TABLE>

The accompanying notes are an integral part of the financial statements.

                                       14
<PAGE>
<TABLE>
<CAPTION>
Espey Mfg. & Electronics Corp.
Statements of Cash Flows
Years Ended June 30, 2009 and 2008
------------------------------------------------------------------------------------------------------------
                                                                                      2009           2008
                                                                                  -----------    -----------
<S>                                                                               <C>            <C>
Cash Flows From Operating Activities:
     Net income ...............................................................   $ 2,733,240    $ 3,421,869

     Adjustments to reconcile net income to net cash provided by operating
     activities:

     Excess tax benefits from share-based compensation ........................        30,245         83,471

     Stock-based compensation .................................................       109,921        143,530

     Depreciation .............................................................       488,461        491,526

     ESOP compensation expense ................................................       416,272        507,805

     Loss on disposal of assets ...............................................        10,695          4,353

     Deferred income tax benefit ..............................................       (88,305)       (38,510)

     Changes in assets and liabilities:

          Increase in trade receivables, net ..................................    (1,487,665)      (625,646)

          Decrease (increase) in income tax receivable ........................       276,087       (276,087)

          Decrease (increase) in other receivables ............................         4,051           (900)

          Increase in ESOP receivable due to dividends on unallocated shares ..       (34,244)       (36,809)

          (Increase) decrease in inventories, net .............................    (2,840,971)       961,093

          Decrease in prepaid expenses and other current assets ...............       122,616        192,524

          Increase (decrease) in accounts payable .............................       398,590       (380,020)

          Decrease in accrued salaries, wages and commissions .................        35,156         22,175

          (Decrease) increase in other accrued expenses .......................        (3,390)           200

          Decrease in vacation accrual ........................................       (22,369)       (40,040)

          (Decrease) increase in payroll and other taxes withheld and accrued..          (100)           127

          Increase (decrease) in income taxes payable .........................       236,646       (283,414)
                                                                                  -----------    -----------

                      Net cash provided by operating activities ...............   $   384,936    $ 4,147,247
                                                                                  -----------    -----------


The accompanying notes are an integral part of the financial statements.

                                                    15
<PAGE>

Cash Flows From Investing Activities:

     Additions to property, plant and equipment .........................       (280,790)       (517,959)

     Payment for loan receivable ........................................             --         (80,000)

     Proceeds from return of loan receivable ............................         26,330          14,998

     Purchase of short term investments .................................     (8,087,874)     (8,135,000)

     Proceeds from maturity of short term investments ...................      9,074,000       5,119,000
                                                                            ------------    ------------

                      Net cash provided by (used in) investing activities        731,666      (3,598,961)
                                                                            ------------    ------------

Cash Flows From Financing Activities:

     Dividends on common stock ..........................................     (5,044,268)     (4,679,491)


     Purchase of treasury stock .........................................       (311,545)       (769,443)


     Proceeds from exercise of stock options ............................        132,532         572,819

     Excess tax benefits from share-based compensation ..................         30,245          83,471
                                                                            ------------    ------------

                      Net cash used in financing activities .............     (5,193,036)     (4,792,644)
                                                                            ------------    ------------

Decrease in cash and cash equivalents ...................................     (4,076,434)     (4,244,358)

Cash and cash equivalents, beginning of the year ........................      6,851,753      11,096,111
                                                                            ------------    ------------

Cash and cash equivalents, end of the year ..............................   $  2,775,319    $  6,851,753
                                                                            ============    ============

Supplemental Schedule of Cash Flow Information:

     Income taxes paid ..................................................   $    470,000    $  1,970,000
                                                                            ============    ============
</TABLE>

The accompanying notes are an integral part of the financial statements.

                                                 16
<PAGE>

Espey Mfg. & Electronics Corp.
Notes to Financial Statements
--------------------------------------------------------------------------------

Note 1. Nature of operations

Espey Mfg. & Electronics  Corp.  (the Company) is a  manufacturer  of electronic
equipment used primarily in military and industrial applications.  The principal
markets for the Company's products are companies that provide electronic support
to both military and industrial applications.

Note 2. Summary of Significant Accounting Policies

Inventory  Valuation,  Cost Estimation and Revenue Recognition Raw materials are
valued at weighted average cost.

Inventoried  work relating to contracts in process and work in process is valued
at actual production cost,  including factory overhead incurred to date. Work in
process  represents  spare units;  parts and other  inventory  items acquired or
produced to service units previously sold or to meet anticipated  future orders.
The cost  elements  of  contracts  in  process  and work in  process  consist of
production  costs of goods and  services  currently  in  process  and  overhead.
Provision  for losses on  contracts  is made when the  existence  of such losses
becomes probable and estimable. The costs attributed to units delivered under
contracts  are based on the estimated  average cost of all units  expected to be
produced. Certain contracts are expected to extend beyond twelve months.

Revenue  is  recognized  on  contracts  in the  period  in which  the  units are
delivered and billed  (units-of-delivery  method). A significant  portion of our
business is  comprised  of  development  and  production  contracts.  Generally,
revenues on long-term  fixed-price  contracts  are  recorded on a percentage  of
completion  basis using units of delivery as the measurement  basis for progress
toward completion.

Percentage  of  completion  accounting  requires  judgment  relative to expected
sales,  estimating costs and making assumptions  related to technical issues and
delivery  schedules.  Contract costs include material,  subcontract costs, labor
and an allocation of overhead  costs.  The estimation of cost at completion of a
contract is subject to numerous variables involving contract costs and estimates
as to the length of time to complete the contract. Given the significance of the
estimation  processes  and  judgments  described  above,  it  is  possible  that
materially  different  amounts of  expected  sales and  contract  costs could be
recorded if different  assumptions were used, based on changes in circumstances,
in the  estimation  process.  When a change in expected sales value or estimated
cost is determined, changes are reflected in current period earnings.

Depreciation
Depreciation  of plant and equipment is computed on a  straight-line  basis over
the estimated useful lives of the assets.

Estimated useful lives of depreciable assets are as follows:

        Buildings and improvements                      10 - 35 years
        Machinery and equipment                          3 - 20 years
        Furniture and fixtures                           5 - 10 years

Income Taxes
The  Company  follows  the  provisions  of  Statement  of  Financial  Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes."

Under the provisions of SFAS No. 109,  deferred tax assets and  liabilities  are
recognized for the future tax consequences  attributable to differences  between
the financial  statement carrying amounts of existing assets and liabilities and
their  respective tax bases.  Deferred tax assets and  liabilities  are measured
using  enacted  tax rates  expected  to apply to taxable  income in the years in
which those temporary  differences are expected to be recovered or settled.  The
effect on deferred taxes and  liabilities of a change in tax rates is recognized
in earnings in the period that  includes the enactment  date. In addition,  SFAS
No. 109 requires that the tax benefit of tax-deductible dividends on unallocated
ESOP shares be recorded as a direct addition to retained earnings rather than as
a reduction of income tax expense.

                                       17
<PAGE>

Espey Mfg. & Electronics Corp.
Notes to Financial Statements
--------------------------------------------------------------------------------

Note 2.  Summary of Significant Accounting Policies, Continued

Cash and Cash Equivalents
Cash and cash equivalents consist of cash in banks, certificates of deposit, and
money market funds.  The Company  considers all highly liquid  investments  with
original maturities of three months or less to be cash equivalents.

Short-term  investments include  certificates of deposit with maturities greater
than three months to a year.

Accounts receivable and allowance for doubtful accounts
The Company extends credit to its customers in the normal course of business and
collateral is generally not required for trade  receivables.  Exposure to credit
risk is  controlled  through  the use of credit  approvals,  credit  limits  and
monitoring procedures.  Accounts receivable are reported net of an allowance for
doubtful accounts.  The Company estimates the allowance based on its analysis of
specific balances. An account is generally considered past due after thirty (30)
days from the invoice date.  Based on these factors,  there was an allowance for
doubtful  accounts  of $3,000 at June 30,  2009.  Changes to the  allowance  for
doubtful  accounts  are charged to expense and  reduced by  charge-offs,  net of
recoveries.

Per Share Amounts
SFAS 128  "Earnings  Per Share"  requires  the Company to  calculate  net income
(loss) per share  based on basic and  diluted  net income  (loss) per share,  as
defined.  Basic EPS  excludes  dilution  and is computed by dividing  net income
(loss) by the  weighted  average  number of shares  outstanding  for the period.
Diluted EPS reflects the  potential  dilution  that could occur if securities or
other  contracts to issue common stock were  exercised or converted  into common
stock.  The dilutive  effect of  outstanding  options  issued by the Company are
reflected in diluted EPS using the  treasury  stock  method.  Under the treasury
stock method,  options will only have a dilutive  effect when the average market
price of common  stock  during  the period  exceeds  the  exercise  price of the
options.

Comprehensive Income
Comprehensive  Income for the years ended June 30, 2009 and 2008 is equal to net
income.

Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amount of  assets  and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period. Actual results could differ from those estimates.

Investment Tax Credits
Investment tax credits are accounted for as a reduction of income tax expense in
the year taxes payable are reduced.

Reclassifications
Certain  reclassifications  may  have  been  made to the  prior  year  financial
statements to conform to the current year presentation.

Recently Issued Accounting Standards
In May 2009, the Financial  Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standard  ("SFAS") No. 165,  Subsequent  Events ("SFAS
165"). SFAS 165 establishes  principles and requirements for subsequent  events.
SFAS 165 is effective for interim or annual financial  periods ending after June
15, 2009. As such, the Company is required to adopt this standard in the current
period.  Adoption of SFAS 165 did not have a significant effect on the Company's
consolidated financial statements.

In May 2008, the FASB issued Statement of Financial  Accounting Standard No. 162
("SFAS 162"), The Hierarchy of Generally Accepted  Accounting  Principals.  SFAS
162  identifies  the sources of  accounting  principles  and the  framework  for
selecting the  principles  used in the  preparation  of financial  statements of
nongovernmental  entities  that  are  presented  in  conformity  with  generally
accepted  accounting  principles  (GAAP)  in  the  United  States.  SFAS  162 is
effective 60 days following the SEC's approval of the Public Company  Accounting
Oversight  Board  amendments to AU Section 411, The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles.  SFAS 162 did not have
a  material  effect  on  the  company's  financial  statements.

                                       18
<PAGE>

Espey Mfg. & Electronics Corp.
Notes to Financial Statements
--------------------------------------------------------------------------------

Note 2.  Summary of Significant Accounting Policies, Continued

In March 2008, the FASB issued  Statement of Financial  Accounting  Standard No.
161  ("SFAS  161"),   Disclosures  about  Derivative   Instruments  and  Hedging
Activities,  an amendment of FASB Statement No. 133. SFAS 161 requires  enhanced
disclosures  about an entity's  derivative and hedging  activities.  SFAS 161 is
effective for financial  statements  issued for fiscal years and interim periods
beginning after November 15, 2008 with early  application  encouraged.  As such,
the Company  was  required to adopt these  provisions  at the  beginning  of the
fiscal year ended June 30, 2009.  The adoption of the provisions of SFAS 161 did
not have a material effect on the Company's financial statements.

In December 2007, the FASB issued Statement of Financial Accounting Standard No.
160 ("SFAS 160"), Noncontrolling Interests in Consolidated Financial Statements,
an  amendment  of ARB No. 51.  SFAS 160  establishes  accounting  and  reporting
standards  for  the  noncontrolling   interest  in  a  subsidiary  and  for  the
deconsolidation  of a subsidiary.  SFAS 160 is effective  for fiscal years,  and
interim  periods  within those fiscal years,  beginning on or after December 15,
2008. As such, the Company was required to adopt these  provisions on January 1,
2009. The adoption of the provisions of SFAS 160 did not have a material  effect
on the Company's financial statements.

In December 2007, the FASB issued Statement of Financial Accounting Standard No.
141(R)  ("SFAS  141(R)"),   Business   Combinations.   SFAS  141(R)  establishes
principles and requirements for how the acquirer  recognizes and measures in its
financial statements the identifiable assets acquired,  the liabilities assumed,
an any  noncontrolling  interest in the  acquiree,  recognizes  and measures the
goodwill acquired in the business combination or a gain from a bargain purchase,
and  determines  what  information  to disclose to enable users of the financial
statements  to  evaluate  the  nature  and  financial  effects  of the  business
combination.  SFAS 141(R) is effective  for fiscal  years,  and interim  periods
within those fiscal years, beginning on or after December 15, 2008. As such, the
Company was required to adopt these  provisions on January 1, 2009. The adoption
of the provisions of SFAS 141(R) did not have a material effect on the Company's
financial statements.

In February 2007, the FASB issued Statement of Financial Accounting Standard No.
159 ("SFAS  159"),  The Fair Value  Option for  Financial  Assets and  Financial
Liabilities.  SFAS 159  provides  companies  with an option  to report  selected
financial assets and financial  liabilities at fair value.  Unrealized gains and
losses on items for which the fair value option has been elected are reported in
earnings at each subsequent reporting date. SFAS 159 is effective beginning July
1, 2008.  The  adoption  of the  provisions  of SFAS 159 did not have a material
effect on the Company's financial statements.

Impairment of Long-Lived Assets
Long-lived assets,  including property,  plant, and equipment,  are reviewed for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying amount of an asset may not be recoverable.  Recoverability of assets to
be held and used is measured by a comparison of the carrying  amount of an asset
to  estimated  undiscounted  future cash flows  expected to be  generated by the
asset.  If the carrying  amount of an asset  exceeds its  estimated  future cash
flows,  an  impairment  charge is recognized by the amount by which the carrying
amount of the asset  exceeds the fair value of the asset.  Assets to be disposed
of are  separately  presented in the balance  sheet and reported at the lower of
the carrying amount or fair value less costs to sell, and no longer depreciated.
The assets and  liabilities of a disposed group  classified as held for sale are
presented  separately in the  appropriate  asset and  liability  sections of the
balance sheet

Concentrations of Risk
The market for our  defense  electronics  products is largely  dependent  on the
availability of new contracts from the United States and foreign  governments to
prime contractors to which we provide components. Any decline in expenditures by
the United  States or  foreign  governments  may have an  adverse  effect on our
financial performance.

Generally,  U.S.  government  contracts  are  subject  to  procurement  laws and
regulations.  Some  of the  Company's  contracts  are  governed  by the  Federal
Acquisition Regulation (FAR), which lays out uniform policies and procedures for
acquiring  goods  and  services  by the  U.S.  government,  and  agency-specific
acquisition  regulations that implement or supplement the FAR. For example,  the
Department of Defense implements the FAR through the Defense Federal Acquisition
Regulation (DFAR).

                                       19
<PAGE>

Espey Mfg. & Electronics Corp.
Notes to Financial Statements
--------------------------------------------------------------------------------

Note 2.  Summary of Significant Accounting Policies, Continued

The FAR also contains  guidelines and  regulations for managing a contract after
award, including conditions under which contracts may be terminated, in whole or
in part,  at the  government's  convenience  or for  default.  If a contract  is
terminated for the  convenience of the  government,  a contractor is entitled to
receive  payments for its  allowable  costs and, in general,  the  proportionate
share of fees or earnings  for the work done.  If a contract is  terminated  for
default, the government generally pays for only the work it has accepted.  These
regulations  also subject the Company to financial  audits and other  reviews by
the  government  of its costs,  performance,  accounting  and  general  business
practices  relating  to its  contracts,  which may result in  adjustment  of the
Company's contract-related costs and fees.

Note 3. Contracts in Process

Contracts in process at June 30, 2009 and 2008 are as follows:
<TABLE>
<CAPTION>
                                                                           2009          2008
                                                                       -----------   -----------
<S>                                                                    <C>           <C>
     Gross contract value                                              $39,116,487   $44,784,584
     Costs related to contracts in process, net of progress payments
       of  $60,079 in fiscal 2009 and $959,175 in fiscal 2008          $10,526,884   $ 7,461,786
</TABLE>

Included in costs relating to contracts in process at June 30, 2009 and 2008 are
costs of $974,342 and $1,911,986,  respectively,  relative to contracts that may
not be completed  within the ensuing year. Under the  units-of-delivery  method,
the related  sale and cost of sales will not be  reflected  in the  statement of
income until the units under contract are shipped.

Note 4. Property, Plant and Equipment

A summary of the original cost of property, plant and equipment at June 30, 2009
and 2008 is as follows:

                                     2009            2008
                                 ------------    ------------
     Land                        $     45,000    $     45,000
     Building and improvements      4,638,879       4,639,626
     Machinery and equipment        6,723,573       6,706,540
     Furniture and fixtures           156,884         156,884
                                 ------------    ------------
                                   11,564,336      11,548,050
     Accumulated depreciation      (8,826,114)     (8,591,460)
                                 ------------    ------------
                                 $  2,738,222    $  2,956,590
                                 ============    ============

Depreciation expense was $488,461 and $491,526,  during the years ended June 30,
2009 and 2008, respectively.

Note 5. Line of credit

Management had available a $3,000,000 line of credit to help fund further growth
or working capital needs, but did not anticipate the need for any borrowed funds
in the  foreseeable  future and therefore did not renew the line of credit which
expired November 30, 2007.

Note 6. Pension Expense

Under terms of a  negotiated  union  contract,  the Company is obligated to make
contributions  to  a  union-sponsored  defined  benefit  pension  plan  covering
eligible employees.  Such contributions and expenses are based upon hours worked
at a specified rate and amounted to $95,711 in fiscal 2009 and $87,159 in fiscal
2008.

The  Company  sponsors  a  401(k)  plan  with  employee  and  employer  matching
contributions.  The employer match is 10% of the employee  contribution  and was
$31,647 and $30,125, for fiscal years 2009 and 2008, respectively.

                                       20
<PAGE>

Espey Mfg. & Electronics Corp.
Notes to Financial Statements
--------------------------------------------------------------------------------

Note 7. Provision for Income Taxes

A summary of the  components  of the  provision  for income  taxes for the years
ended June 30, 2009 and 2008 is as follows:

                                          2009           2008
                                      -----------    -----------
     Current tax expense - federal    $   953,319    $ 1,561,918
     Current tax expense - state            6,806          5,909
     Deferred tax (benefit) expense       (88,305)       (38,511)
                                      -----------    -----------
                                      $   871,820    $ 1,529,316
                                      ===========    ===========

Deferred income taxes reflect the impact of "temporary  differences" between the
amount of assets and  liabilities  for  financial  reporting  purposes  and such
amounts measured by tax laws and regulations.  These "temporary differences" are
determined in accordance with SFAS No. 109.

The  combined  U.S.  federal and state  effective  income tax rates of 24.2% and
30.9%, for 2009 and 2008 respectively,  differed from the statutory U.S. federal
income tax rate for the following reasons:

<TABLE>
<CAPTION>
                                                                    2009       2008
                                                                  ------     ------
<S>                                                                 <C>        <C>
     U.S. federal statutory income tax rate                         34.0%      34.0%
     Increase (reduction) in rate resulting from:
         State franchise tax, net of federal income tax benefit      0.1        0.1
         ESOP cost versus Fair Market Value                          0.7        1.1
         Dividend on allocated ESOP shares                          (8.9)      (1.6)
         Qualified Production Activities                            (1.7)      (2.0)
         Stock-based compensation                                     .1       (0.7)
         Other                                                       (.1)        --
                                                                  ------     ------
     Effective tax rate                                             24.2%      30.9%
                                                                  ======     ======
</TABLE>

For the years  ended  June 30,  2009 and 2008  deferred  income  tax  benefit of
$(88,305)  and  $(38,511),  respectively,  result from the changes in  temporary
differences  for each year. The tax effects of temporary  differences  that give
rise to deferred tax assets and deferred tax liabilities as of June 30, 2009 and
2008 are presented as follows:

                                                             2009       2008
                                                           --------   --------
     Deferred tax assets:
         Accrued expenses ..............................   $124,157   $126,808
         ESOP ..........................................     95,319     77,987
         Stock-based compensation ......................      8,996      6,775
         Inventory - effect on uniform capitalization ..     83,575     26,699
         Other .........................................      8,108      9,572
                                                           --------   --------
                  Total deferred tax assets ............    320,155    247,841
                                                           --------   --------

     Deferred tax liabilities:
         Property, plant and equipment - principally due
           to differences in depreciation methods ......    194,573    210,564
                                                           --------   --------

                  Total deferred tax liabilities .......    194,573    210,564
                                                           --------   --------
     Net deferred tax asset ............................   $125,582   $ 37,277
                                                           ========   ========

In assessing  the  realizability  of deferred tax assets,  management  considers
whether it is more likely than not that some  portion or all of the deferred tax
assets will be  realized.  The  ultimate  realization  of deferred tax assets is
dependent  upon the  generation of future  taxable  income during the periods in
which those temporary  differences become deductible.  Management  considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning  strategies in making this assessment.  Based upon the level of
historical  taxable  income and  projection  for future  taxable income over the
period in which the deferred tax assets are deductible,  management  believes it
is more  likely  than not that the Company  will  realize the  benefits of these
temporary differences without consideration of a valuation allowance.

                                       21
<PAGE>

Espey Mfg. & Electronics Corp.
Notes to Financial Statements
--------------------------------------------------------------------------------

Note 7. Provision for Income Taxes, Continued

As the  result of the  implementation  of the FASB  interpretation  No. 48 ("FIN
48"),  Accounting for  Uncertainty in Income Taxes - An  Interpretation  of FASB
Statement  No.  109,  the  Company   recognized  no  material   adjustments   to
unrecognized tax benefits.  At the adoption date of July 1, 2007, and as of June
30, 2009, the Company has no unrecognized tax benefits.

The  Company  recognizes   interest  and  penalties  related  to  uncertain  tax
positions,  if any, in general and administrative  expense. As of June 30, 2009,
the Company has not recorded any  provision  for accrued  interest and penalties
related to uncertain tax positions.

By  statute,  tax years  ending  June 30,  2009,  2008 and 2007  remain  open to
examination by the major taxing jurisdictions to which the Company is subject.

Note 8. Significant Customers

A significant  portion of the Company's  business is the  production of military
and industrial  electronic equipment for use by the U.S. and foreign governments
and certain industrial customers.  Sales to two domestic customers accounted for
33% and 30% of total  sales in  fiscal  2009.  Sales to two  domestic  customers
accounted for 31% and 25% of total sales in fiscal 2008.

Export sales in fiscal 2009 and fiscal 2008 were  approximately  $4,691,000  and
$5,538,000, respectively.

Note 9. Stock Rights Plan

The Company has a  Shareholder  Rights Plan that  expires on December  31, 2009.
Under this plan,  common stock purchase rights were distributed as a dividend at
the rate of one right for each share of common stock outstanding as of or issued
subsequent  to April 14, 1989.  Each right  entitles  the holder  thereof to buy
one-half  share of common  stock of the Company at an exercise  price of $25 per
share  subject to  adjustment.  The rights are  exercisable  only if a person or
group acquires beneficial ownership of 15% or more of the Company's common stock
or commences a tender or exchange offer which, if  consummated,  would result in
the  offeror  individually  or,  together  with all  affiliates  and  associates
thereof,  being  the  beneficial  owner of 15% or more of the  Company's  common
stock.

If  a  15%  or  larger  shareholder   should  engage  in  certain   self-dealing
transactions  or a merger with the Company in which the Company is the surviving
corporation  and its shares of common  stock are not changed or  converted  into
equity  securities  of any other  person,  or if any  person  were to become the
beneficial owner of 15% or more of the Company's  common stock,  then each right
not owned by such  shareholder or related  parties of such  shareholder  (all of
which will be void) will  entitle its holder to  purchase,  at the right's  then
current  exercise price,  shares of the Company's common stock having a value of
twice the right's exercise price. In addition, if the Company is involved in any
other  merger  or  consolidation  with,  or sells  50% or more of its  assets or
earning power to another person, each right will entitle its holder to purchase,
at the right's then current exercise price, shares of common stock of such other
person having a value of twice the right's exercise price.

The Company  generally is entitled to redeem the rights at one cent per right at
any time until the 15th day (or 25th day if extended by the  Company's  Board of
Directors)  following public  announcement that a 15% position has been acquired
or the  commencement of a tender or exchange offer which, if consummated,  would
result in the offer or,  together with all affiliates  and  associates  thereof,
being the beneficial owner of 15% or more of the Company's common stock.

                                       22
<PAGE>

Espey Mfg. & Electronics Corp.
Notes to Financial Statements
--------------------------------------------------------------------------------

Note 10. Employee Stock Ownership Plan

The Company sponsors a leveraged employee stock ownership plan (the "ESOP") that
covers  all  nonunion  employees  who work  1,000 or more hours per year and are
employed on June 30. The Company makes annual contributions to the ESOP equal to
the ESOP's debt service less  dividends on  unallocated  shares  received by the
ESOP. All dividends on unallocated  shares  received by the ESOP are used to pay
debt service.  Dividends on allocated ESOP shares are recorded as a reduction of
retained earnings.  As the debt is repaid,  shares are released and allocated to
active employees,  based on the proportion of debt service paid in the year. The
Company  accounts for its ESOP in accordance  with  Statement of Position  93-6.
Accordingly,  the shares  purchased  by the ESOP are  reported as Unearned  ESOP
Shares in the  statement  of  financial  position.  As shares  are  released  or
committed-to-be-released,  the Company reports compensation expense equal to the
current  average market price of the shares,  and the shares become  outstanding
for  earnings-per-share  (EPS)  computations.   ESOP  compensation  expense  was
$416,272  for the year ended June 30, 2009 and  $507,805 for the year ended June
30, 2008. The ESOP shares as of June 30, 2009 and 2008 were as follows:

                                          2009         2008
                                       ----------   ----------
     Allocated Shares                     450,228      442,243
     Committed-to-be-released shares           --           --
     Unreleased shares                    201,666      225,000
                                       ----------   ----------

     Total shares held by the ESOP        651,894      667,243
                                       ==========   ==========

     Fair value of unreleased shares   $3,095,573   $4,272,750
                                       ==========   ==========

Note 11. Stock-based Compensation

The Company follows  Statement of Financial  Accounting  Standards No. 123(R) in
establishing  standards for the accounting for  transactions  in which an entity
exchanges its equity instruments for goods or services,  as well as transactions
in which an entity incurs liabilities in exchange for goods or services that are
based on the fair value of the entity's equity instruments or that maybe settled
by the issuance of those equity  instruments.  SFAS No. 123(R) requires that the
cost resulting from all  share-based  payment  transactions be recognized in the
financial  statements based on the fair value of the share-based  payment.  SFAS
No.123(R)  establishes fair value as the measurement objective in accounting for
share-based payment  transactions with employees,  except for equity instruments
held by employee share ownership plans.

Total stock-based compensation expense recognized in the Statement of Income for
the fiscal  years  ended June 30,  2009 and 2008,  was  $109,921  and  $143,530,
respectively,  before income taxes.  The related total  deferred tax benefit was
approximately $9,683 and $11,239, for the same periods. SFAS No. 123(R) requires
the tax benefits  resulting  from tax  deductions in excess of the  compensation
cost  recognized  for those  options to be  classified  and  reported as both an
operating cash outflow and a financing  cash inflow on a prospective  basis upon
adoption.

As  of  June  30,  2009,  there  was  approximately   $116,045  of  unrecognized
compensation  cost  related  to  stock  option  awards  that is  expected  to be
recognized as expense over the next 1.75 years.  The total  deferred tax benefit
related to these awards is approximately $11,003.

The  Company has one  employee  stock  option  plan under  which  options may be
granted,  the 2007 Stock Option and Restricted Stock Plan (the "2007 Plan"). The
Board of  Directors  may grant  options  to  acquire  shares of common  stock to
employees  of the  Company at the fair market  value of the common  stock on the
date of grant.  Generally,  options granted have a two-year vesting period based
on two years of continuous service and have a ten-year  contractual life. Option
grants provide for accelerated  vesting if there is a change in control.  Shares
issued upon the  exercise of options are from those held in  Treasury.  The 2007
Plan was approved by the Company's  shareholders at the Company's Annual Meeting
on November 30, 2007 and  supercedes  the Company's  2000 Stock Option Plan (the
"2000 Plan").  Options covering 400,000 shares are authorized for issuance under
the 2007 Plan,  and 61,500 have been granted and are  outstanding as of June 30,
2009.  While no further grants of options may be made under the 2000 Plan, as of
June 30, 2009,  78,900 options remain  outstanding,  vested and exercisable from
the 2000 Plan.

                                       23
<PAGE>

Espey Mfg. & Electronics Corp.
Notes to Financial Statements
--------------------------------------------------------------------------------

Note 11. Stock-based Compensation, Continued

SFAS No.  123(R)  requires the use of a valuation  model to  calculate  the fair
value of stock-based  awards.  The Company has elected to use the  Black-Scholes
option valuation model, which incorporates  various assumptions  including those
for volatility, expected life and interest rates.

The table below outlines the weighted average  assumptions that the Company used
to  calculate  the fair value of each option  award for the years ended June 30,
2009 and 2008, respectively:

                                                     2009           2008
                                                   ---------      ---------
       Dividend yield                                 5.30%         3.70%
       Expected stock price volatility               31.41%        27.03%
       Risk-free interest rate                        1.79%         3.12%
       Expected option life (in years)                4.3 years     4.0 years
       Weighted average fair value per share
          of options granted during the period       $2.767        $3.934

The Company pays  dividends  quarterly and  anticipates  that it will be able to
continue  to pay  dividends  in the  foreseeable  future.  Expected  stock price
volatility is based on the  historical  volatility of the Company's  stock.  The
risk-free interest rate is based on the implied yield available on U.S. Treasury
issues with an equivalent term  approximating  the expected life of the options.
The expected  option life (in years)  represents  the  estimated  period of time
until exercise and is based on actual historical experience.

The following table  summarizes stock option activity during the year ended June
30, 2009:

                                              Employee Stock Options Plan
                                       -----------------------------------------
                                                                     Weighted
                                          Number of     Weighted      Average
                                           Shares        Average     Remaining
                                           Subject      Exercise    Contractual
                                         To Options       Price        Term
                                       -----------------------------------------
       Balance at July 1, 2008            126,500         $18.40        7.36
       Granted                             31,800         $17.09        9.64
       Exercised                           (8,800)        $15.06          --
       Forfeited or expired                (9,100)        $18.81          --
                                       -----------------------------------------
       Balance at June 30, 2009           140,400         $18.29        7.90
                                       =========================================
       Exercisable at June 30, 2009        78,900         $17.43        6.84
                                       =========================================

The intrinsic value of stock options exercised was $21,073 and $258,783,  during
the year ended June 30,  2009 and 2008,  respectively.  The  intrinsic  value of
stock  options  outstanding  and  exercisable  as of June 30,  2009 and 2008 was
$26,220 and $138,299, respectively.

Note 12. Financial Instruments/Concentration of Credit Risk

The  carrying  amounts  of  financial  instruments,   including  cash  and  cash
equivalents, short term investments,  accounts receivable,  accounts payable and
accrued  expenses,  approximated fair value as of June 30, 2009 and 2008 because
of the relatively short maturities of these instruments.

Financial  instruments that potentially subject the Company to concentrations of
credit  risk  consist  principally  of cash  and  cash  equivalents,  short-term
investments  and  accounts  receivable.  The  Company  maintains  cash  and cash
equivalents with various financial  institutions.  At times such investments may
be in excess of FDIC  insurance  limits.  As disclosed in note 8, a  significant
portion of the Company's  business is the  production of military and industrial
electronic  equipment  for use by the U.S. and foreign  governments  and certain
industrial  customers.  The related accounts receivable balance, as a percentage
of the Company's total trade accounts receivable balance, was 79% represented by
four customers at June 30, 2009, and 56.8%, by three customers at June 30, 2008.

                                       24
<PAGE>

Espey Mfg. & Electronics Corp.
Notes to Financial Statements
--------------------------------------------------------------------------------

Note 12. Financial Instruments/Concentration of Credit Risk, Continued

Although the Company's  exposure to credit risk  associated  with  nonpayment of
these concentrated  balances is affected by the conditions or occurrences within
the U.S. and foreign  governments,  the Company believes that its trade accounts
receivable credit risk exposure is limited.  The Company performs ongoing credit
evaluations of its customer's financial conditions and requires collateral, such
as progress  payments,  in certain  circumstances.  The Company  establishes  an
allowance for doubtful  accounts based upon factors  surrounding the credit risk
of specific customers, historical trends and other information.

Note 13. Related Parties

The  administration  of the  shares of common  stock  held by the ESOP  Trust is
subject to the Second Amended and Restated  Plan,  effective as of July 1, 2002,
creating the Trust,  and a Trust  Agreement  dated July 15, 2005.  The Trustees'
rights with  respect to the  disposition  of shares are governed by the terms of
the Plan and the Trust  Agreement.  As to shares that have been allocated to the
accounts of participants in the ESOP Trust,  the Plan provides that the Trustees
are required to vote such shares in accordance with  instructions  received from
the participants. As to unallocated shares and allocated shares for which voting
instructions  have not been received from  participants,  the Plan provides that
the Trustees are required to vote such shares in  accordance  with the direction
of a Committee,  appointed  by the Board of  Directors of the Company  under the
terms of the Plan and Trust  Agreement.  See note 10 for additional  information
regarding the ESOP.

Note 14. Commitments and Contingencies

The Company at certain  times enters into standby  letters of credit  agreements
with  financial  institutions  primarily  relating  to the  guarantee  of future
performance on certain contracts.  Contingent liabilities on outstanding standby
letters of credit agreements aggregated to zero at June 30, 2009 and 2008.

Note 15. Stockholders' Equity

Reservation of Shares
The Company has reserved common shares for future issuance as follows as of June
30, 2009:

       Stock options outstanding                            140,400
       Stock options available for issuance                 338,500
                                                          ---------
       Number of common shares reserved                     478,900
                                                          =========

The  following  table  sets  forth  the  reconciliation  of the  numerators  and
denominators  of the basic and diluted  per share  computations  for  continuing
operations for the years ended June 30:

<TABLE>
<CAPTION>
                                                                           2009           2008
                                                                       -----------    -----------
<S>                                                                    <C>            <C>
     Numerator:
     Net Income                                                        $ 2,733,240    $ 3,421,869
                                                                       ===========    ===========

     Denominator:
     Basic EPS:
          Common shares outstanding, beginning of period                 2,325,902      2,316,893
          Unearned ESOP shares                                            (225,000)      (249,167)
          Weighted average common shares issued during the period            5,934         24,026
          Weighted average common shares purchased during the period        (7,967)       (21,114)
          Weighted average ESOP shares earned during the period              8,774          9,096
                                                                       -----------    -----------
          Denominator for basic earnings per common shares -
              Weighted average common shares                             2,107,643      2,079,734
                                                                       ===========    ===========
</TABLE>

                                       25
<PAGE>

Espey Mfg. & Electronics Corp.
Notes to Financial Statements
--------------------------------------------------------------------------------

Note 15. Stockholders' Equity, Continued

<TABLE>
<CAPTION>
     Diluted EPS:
<S>                                                                         <C>           <C>
          Common shares outstanding, beginning of period                    2,325,902     2,316,893
          Unearned ESOP shares                                               (225,000)     (249,167)
          Weighted average common shares issued during the period               5,934        24,026
          Weighted average common shares purchased during the period           (7,967)      (21,114)
          Weighted average ESOP shares earned during the period                 8,774         9,096
          Weighted average dilutive effect of issued or forfeited shares        6,155        24,102
                                                                           ----------    ----------
          Denominator for diluted earnings per common shares -
              Weighted average common shares                                2,113,798     2,103,836
                                                                           ==========    ==========
</TABLE>

Not included in this  computation  of earnings per share for the year ended June
30, 2009 and 2008 were options to purchase 136,000 and 34,400, respectively,  of
the Company's common stock.  These options were excluded because their inclusion
would have been  anti-dilutive  due to the average  strike price  exceeding  the
average market price of those shares.

Note 16. Quarterly Financial Information (Unaudited)

<TABLE>
<CAPTION>
                                    First        Second          Third        Fourth
      2009                        Quarter       Quarter        Quarter       Quarter
                              -----------   -----------    -----------   -----------
<S>                           <C>           <C>            <C>           <C>
      Net Sales ...........   $ 6,053,519   $ 6,194,177    $ 6,709,880   $ 8,284,059
         Gross profit .....     1,151,275       625,930      1,732,812     2,576,709
         Net income .......       398,296       (42,412)       781,272     1,596,084

     Net income per share -
      Basic ...............           .19          (.02)           .37           .76
      Diluted .............           .19          (.02)           .37           .75

                                                                                2008
      Net Sales ...........   $ 6,301,786   $ 6,732,144    $ 6,479,020   $ 6,188,789
         Gross profit .....     1,349,110     1,682,585      2,177,431     1,653,120
         Net income .......       591,583       797,086      1,099,205       933,995

     Net income per share -
      Basic ...............           .29           .38            .53           .45
      Diluted .............           .28           .37            .53           .45
</TABLE>

Note 17. Subsequent Events

Subsequent  events were  evaluated  through  September 7, 2009,  the dates these
financial statements were available for issue.

                                       26
<PAGE>

Item 9.  Changes  in  and  Disagreements  With  Accountants  on  Accounting  and
         Financial Disclosure

         None

Item 9A(T). Controls and Procedures

Evaluation of Controls and Procedures

(a) The Company's  management,  with the  participation  of the Company's  chief
executive officer and chief financial officer,  carried out an evaluation of the
effectiveness  of our  disclosure  controls and  procedures  (as defined in Rule
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end
of the  period  covered  by this  Annual  Report  on Form  10-K.  Based  on such
evaluation,  our chief  executive  officer  and  chief  financial  officer  have
concluded that our disclosure  controls and procedures  were effective as of the
end of the period covered by this report.

(b) There have been no changes in our internal controls over financial reporting
during the period covered by this report that have materially  affected,  or are
reasonably  likely to materially  affect,  our internal  controls over financial
reporting.

Management's Report on Internal Control Over Financial Reporting

Management  of our  Company is  responsible  for  establishing  and  maintaining
adequate internal control over financial  reporting,  as that term is defined in
Exchange Act Rules 13a-15(f) and 15d-15(f).  Our internal control over financial
reporting is a process designed to provide  reasonable  assurance  regarding the
reliability of financial  reporting and the preparation of financial  statements
for  external  purposes  in  accordance  with  generally   accepted   accounting
principles.

Because of its inherent  limitations,  internal control over financial reporting
may not prevent or detect misstatements.  Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate  because of changes in  conditions,  or that the degree of compliance
with the policies or procedures may deteriorate.

Under the supervision and with the  participation  of our management,  including
the principal executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of our internal control over financial reporting
using the criteria set forth in Internal Control-Integrated  Framework issued by
the Committee of Sponsoring  Organizations of the Treadway Commission.  Based on
our  evaluation  using the  criteria  set forth in  Internal  Control-Integrated
Framework,  management  has concluded  that our internal  control over financial
reporting was effective as of June 30, 2009.

This  annual  report does not include an  attestation  report of our  registered
public accounting firm regarding internal control over financial reporting.  Our
report was not subject to attestation by our registered  public  accounting firm
pursuant  to  temporary  rules  of  the  SEC  that  permit  us to  provide  only
management's report in this annual report.

Item 9B. Other information

         None


                                       27
<PAGE>

                                    PART III

The  information  called for by "Item 10.  Directors,  Executive  Officers,  and
Corporate  Governance",  "Item 11. Executive  Compensation",  "Item 12. Security
Ownership of Certain  Beneficial  Owners and Management and Related  Stockholder
Matters", "Item 13. Certain Relationships and Related Transactions, and Director
Independence" and "Item 14. Principal  Accountant Fees and Services",  is hereby
incorporated  by  reference  to the  Company's  Proxy  Statement  for its Annual
Meeting of Shareholders, (scheduled to be held on November 20, 2009) to be filed
with the SEC pursuant to  Regulation  14A under the  Securities  Exchange Act of
1934, as amended.

                                     PART IV

Item 15. Exhibits, Financial Statement Schedules Signatures

         3.1      Certificate  of  incorporation  and  all  amendments   thereto
                  (incorporated by reference to Exhibit 3.1 to Espey's Report on
                  Form 10-K for the year ended June 30,  2004 and Report on Form
                  10-Q for the quarter ended December 31, 2004)

         3.2      Amended and  Restated  By-Laws  (incorporated  by reference to
                  Exhibit 3.2 to Espey's  Report on Form 8-K dated  February 26,
                  2009)

         4.1      Amended and Restated Rights  Agreement,  dated March 31, 1989,
                  as amended  February 12, 1999 and  December 31, 1999,  between
                  Espey Mfg. &  Electronics  Corp.  and  Registrar  and Transfer
                  Company  (incorporated  by reference to Espey's Form 8-K dated
                  December 20, 1999)

         4.2      Description  of Capital  Stock  (incorporated  by reference to
                  Espey's Report on Form 8-K dated October 7, 2005)

         10.1     2000 Stock Option Plan  (incorporated  by reference to Espey's
                  Definitive  Proxy  Statement  dated  December  6, 1999 for the
                  January 4, 2000 Annual Meeting)

         10.2     Executive  Officer  contract  (incorporated  by  reference  to
                  Exhibit  10.2 to  Espey's  Report on Form 8-K  dated  July 27,
                  2009)

         10.3     2007 Stock Option and Restricted  Stock Plan  (incorporated by
                  reference to Espey's  Proxy  Statement  dated October 23, 2007
                  for the November 30, 2007 Annual Meeting)

         11.1     Statement  re:  Computation  of Per  Share Net  income  (filed
                  herewith)

         14.1     Code of ethics  (incorporated  by reference to Espey's website
                  www.espey.com)
                  -------------

         23.1     Consent of Rotenberg & Co., LLP (filed herewith)

         31.1     Certification of the Chief Executive Officer pursuant to Rules
                  13a-14(a) and 15d-14(a)  under the Securities  Exchange Act of
                  1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002 (filed herewith)

         31.2     Certification of the Principal  Financial  Officer pursuant to
                  Rules  13a-14(a) and 15d-14(a)  under the Securities  Exchange
                  Act  of  1934,  as  adopted  pursuant  to  Section  302 of the
                  Sarbanes-Oxley Act of 2002 (filed herewith)

         32.1     Certification  of the Chief Executive  Officer  pursuant to 18
                  U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002 (filed herewith)

         32.2     Certification of the Principal  Financial  Officer pursuant to
                  18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of
                  the Sarbanes-Oxley Act of 2002 (filed herewith)

                                       28
<PAGE>


                               S I G N A T U R E S


Pursuant to the requirements of Section 13 and 15 (d) of the Securities Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.



                                                 ESPEY MFG. & ELECTRONICS CORP.



                                                 /s/Howard Pinsley
                                                 ---------------------------
                                                 Howard Pinsley
                                                 Chief Executive Officer

/s/Howard Pinsley                                Chief Executive Officer
---------------------------                      September 8, 2009
Howard Pinsley

/s/David O'Neil                                  Treasurer
---------------------------                      (Principal Financial Officer)
David O'Neil                                     September 8, 2009

/s/Katrina Sparano                               Assistant Treasurer
---------------------------                      (Principal Accounting Officer)
Katrina Sparano                                  September 8, 2009

/s/Barry Pinsley                                 Director
---------------------------                      September 8, 2009
Barry Pinsley

/s/Seymour Saslow                                Director
---------------------------                      September 8, 2009
Seymour Saslow

/s/Michael W. Wool                               Director
---------------------------                      September 8, 2009
Michael W. Wool

/s/Paul J. Corr                                  Director
---------------------------                      September 8, 2009
Paul J. Corr

/s/Alvin O. Sabo                                 Director
---------------------------                      September 8, 2009
Alvin O. Sabo

/s/Carl Helmetag                                 Director
---------------------------                      September 8, 2009
Carl Helmetag


                                       29